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Tonight From Washington

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Tom Whitehead 17, Luxembourg 10, Whitehead 9, Margaret 9, Washington 8, Us 7, At&t 5, Otp 5, Kansas 4, George Mason 4, United States 4, Dr. Billington 4, Nixon 4, Mit 3, Juliette Cubanski 3, U.s. 3, Brussels 3, Bruce Owen 3, Daniel Patrick Moynihan 2, Thomas Hazlett 2,
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  CSPAN    Tonight From Washington    News/Business. News.  

    February 11, 2013
    8:30 - 11:00pm EST  

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to provide access to the story, the personal history of tom whitehead's participation in critical events of the 20th century. in addition to access, we also pledged the necessary corollary to protect and preserve these materials in perpetuity. tom hail from kansas whereas a boy his interest in ham radio foretold his life work. undergraduate and graduate studies at m.i.t. and electrical engineering and ultimately the engine if not the policy engineer who designed the domestic satellite policy that opened the skies to cable television and leading to sweeping and lasting changes in the entire telecommunications landscape in the united states and quite frankly the world. while tom whitehead in great
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part made his reputation on this and his participation in ensuring a smooth transition for president ford's move into the white house, we at have the library know from our experiences that researchers ,-com,-com ma scholars, civil servants and curious citizens will find ways to learn from his collection that we cannot really imagine today. the continuing interest in technology, its free flow with the subject of a book that we reviewed yesterday in "the wall street journal." this particular collection, the whitehead papers, gives us all gathered here today much pride. under the leadership of librarian of congress j. h. billington and with great assistance from chief of the manuscript division and his extraordinary staff, allen koltai tom studs and janice
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ruse, dr. whitehead, tom's widow has developed a web site containing digitized copies of much of the collection. knowing that there are jams her to be discovered by future generations, she has explored the last and most effective ways to organize the materials and use the semantic descriptions of specific items to assist those who will mind these riches in the years to come. the web site also provides links to other collections containing relevant materials produced by others or by tom's own hand, memos given to others in the course of communication and thus becoming part of their history but where everything will be connected. we are celebrating these new collaborations of all kinds that can only benefit the quest of
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knowledge. the library of congress is all about this quest. manuscripts, musical scores, movies, maps and frankly any medium from the past or present are yet to be invented in the future that will contain knowledge finds a safe and will coming home here. these many diverse things are connected by the thousands of people who come through our doors literally or virtually every day. and these collections form the foundation of the library of congress as a library but also its role as classroom, lecture hall, performance based and venue for enlightenment and discovery of new things. it is with this in mind that it is a pleasure to turn the podium over to dr. margaret whitehead
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who will say a few remarks and introduce our program for this evening. thank you dr. whitehead. [applause] >> i hope after roberta's remarks that many of you are worried about the -- i will say that it's all there however. dr. billington and associate library and roberta -- james hudson, library officials, government officials, colleagues, new friends, old friends, i am simply thrilled and honored to see each of the
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year tonight. thank you for coming to this library from across the street and from all over the country. it is a joy that to think because of your connection to tom into each other that you are here. finding many of you and your addresses it became a heartwarming experience to learn just how connected you are to each other. and indeed how connected we all are through family, the white house, astra, george mason, the prudential mutual fund board, the hudson institute, the fight for internet freedom and tom's favorite great american pastimes dr. billington thank you for leaving the library with all -- what we we all recognize as the distinction and tear the 21st century and to your great judgment in bringing roberta i
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shaffer here. during the months of her chairman she has been a wise and important support. i have learned that she is the library and and the executive charge by dr. billington and in fact congressional and national library of the 21st century needs to be. her resume is reminiscent of -- het and positions across the world that were aid her in helping dr. billington make the library into the digital age. it is a privilege to have tom whitehead's statements here and i thank you both. i also thank the manuscript division, the curator of the eisenhower papers for several years whose idea was, who originated the idea of having tom's papers here and also john kaine who bears the honor of also being the co-author of the papers and the most elegant and
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graceful procurement officer that a library could ever have. i also extend my very warm thanks to ken weiss 9 -- weinstein where tom served and where i now serve on the board. canned has given his wise counsel. i think with my whole heart christopher muse, distinguished fellow at the institute for moderating, supporting and applying his famously great line in so many hours to tom whitehead as the topic. now let me turn to you and tom now. if he were here he would surely thank you extravagant way. yes he got better at thinking people as he garbled or per that the creative thinking that went into the papers and hope to make them significant enough for them to be here. i hope you will forgive me because there are so many examples of this. there are two that i would particularly like to -- examples
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would be that bruce owen is credited with advising, baathist direction of the duration of at&t. and the revolutionary concept of of -- [inaudible] and now let's get to tom, my husband. throughout the entire time i was married to tom a date never went by without him saying to joined phrases and they were, if you could just fill in the blank, i'll bet you could, fill in the more glorious blank. in other words proposals set up an action. while you could call this the framework for anyone's thinking, if you could just, and though that you could, seemed to have seem to have been treated to for thought and analysis and this was the case.
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it led to some remarkable results. it could lead to home repairs and practical jokes that belongs in the "guinness book of world records" or could lead to the boosting of the entire lead -- or the liberation of the state of television. the evidence of this, and the evidence of this is all around this room. even today some people believe that tom's major accomplishment was hiring -- and brian lamb but very seriously the results are in the paper that will reside here in the library. those are mostly the two sets of white house papers, those of special assistant to the president director of the office of telecommunications policy. his personal papers as director
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of the four transition team and those of his failed venture national exchange. parenthetically, i fear that the galaxy of hughes committee geishas who were part of the story the cable revolution aren't -- and the ses luxembourg papers which bore the story of the concept of the novel sunlight dish he carried to europe and the free enterprise business plan he devised for it. are under review. so you ask, how did tom, if you could just and i'll bet you could mentality spirit the papers to this treasured library? first, he took his papers with him when he left the white house. second, during the jurassic area buying domains he bought --.com. third, he accepted allen's and invitation to be a distinguished visiting professor at the loss
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school at george mason decided to write a book and in preparation invited his esteemed teacher colleagues and friends. they were don baker, henry geller, dale hatfield, ryan lamb, thomas hazlett, glenn robinson, and wiley. fourth, he brought his papers from the basement and put them right in the midst of our lives. fifth, bringing susan burgess into our lives to do a search with him meant the production of the large archive. sixth, he wrote some of the book lastly, he he trained of a telecom policy journal on the bath and as an afterthought he said, i would like to include my papers in the background for scholarly research. meanwhile the calm tom that we all knew was doing is hardly
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ever before for two things. these were his deep opposition to the regulation of the internet and his upset, and i do mean upset over the lack of internet freedom in close regime societies. with all of this turmoil and telecom eight days before he died he called a friend to interview him. that was john eager, to interview him and spoke at length about the arc of telecom history to which i believe he had contributed. i had seen the whole of his life long before -- and it made me want very much to donate his papers. then i knew that tom did not like attention. i am sure that as no surprise in the view. he would stand at the back row pedigree photograph and i would catch mentored using himself as a small businessman whenever he could get away with it. were he here though, he would be the first to say that during down phases of his entrepreneurial career he was actually a very small businessman. but then by betting -- but then
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by betting that he could he himself had somewhat paradoxically set the stage for the donation of his papers. the two sets of white house papers in the george mason transcripts awaited. the bills were coming and from go daddy and the unfinished essay in his research were poised as scholarly tools. his concern for the evolution of telecom policy and internet freedom sealed my conviction. it seemed a very short leap indeed to have the papers reside in the library of congress, to have them on clay t. whitehead .com and to link them to institutions and somehow compensate for the lack of the galaxy and astro papers with my part-time multiyear project of background resource -- a background and resource guide. see it on clay t. whitehead.com.
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channeling tom, the bet was made but there was one more bad and that was that i'd might accept the library's generous invitation to come to this magnificent building with their families, our good friends and his wonderful colleagues to celebrate the panel. and lastly, i'll bet that i could as the most accomplished moderator in washington and perhaps anywhere to lead it. christopher demuth has been a force of the power centers of policy making for almost all of his career. six months after graduating from harvard college in 1968 he found himself working for daniel patrick moynihan and the nixon white house on urban affairs and environmental issues. following law school at the university of chicago, and several years practicing law and teaching at harvard, chris returned to washington where he was the deregulation czar at the
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white house and at a lan beef. he cuts of his leadership in the last quarter century and transforming aei where he was president and ceo to the most prominent public policy institute in the world we now recognize him as a giant in the industry. i'm delighted to introduce him as the moderator of our panel. thank you so much for being here. [applause] [applause] >> thank you margaret. this wonderful evening is all you're doing. i speak for everyone present an offering profound gratitude for your generosity, grace, care and
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intensity of purpose that have brought us all together. [laughter] and we extend hearty thanks and congratulations to jim billington, roberta schaefer and their colleagues at the library of congress for undertaking to preserve tom's papers for posterity. politics consists of the competition of interests and the competition of ideas. among interests, the advantage lies with those that have already got themselves politically entrenched, farmers, teachers, retirees. among ideasthe ideas, the advantage lies with those that mobilize tangible constituencie, homeownership, too big to fail finance. new interest and abstract ideas however worthy, operate at a disadvantage.
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at the very back of the pack is the idea that is good but hypothetical and that not only lacks a large constituency but is actively of posed by entrenched interests. and yet there are cases where such ideas do somehow prevail and shower society with unanticipated benefits. it is for this reason that we should document, study, celebrate and emulate tom whitehead and the amazing subsequent career as a pathbreaking entrepreneur. that history will not be lost thanks to the library of congress and to the web site that margaret has established and launched today. but it does take some explaining. tom was a reserved and cerebral man. he was preoccupied with the deep structure of things rather than
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their surface appearance, with a hard engineering and economic facets of the situation rather than its transient political manifestations. he could be confident and incisive in analyzing problems and strategies and warm and witty and conversation, but in the face of the talking point diatribes so common to washington, he would sit saying nothing at all, staring at his careless interlocutory sick and unsettling silence. he was occasionally somewhat mysterious and indirect in its methods so that no one knew exactly where he was going until suddenly he was there. anyone who met him in the late 1960s would have judged him as somewhat frighteningly brainy academic who would be a complete disaster as a political operative or business promoter.
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and yet tom's practical accomplishments were not only great but also transforming, so much so that they risked being obscured by the nobel prize fallacy. when the nobel of economics is announced each october, newspaper readers everywhere explain, what? he got the nobel prize for that? but it's completely obvious. what they fail to see is how strange and errant the idea had appeared to be one first propounded decades earlier and how it had been roundly denounced and contemptuously dismissed until it triumphed so completely that it became the new conventional wisdom and then penetrated the wider culture. so, our aim this evening is to provide perspective and perhaps a bit of personal color to the days of yore when the young
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nixon aide coolly advance a set of policy ideas that were denounced and dismissed and forcefully and sometimes ferociously opposed by the entire telecommunications establishment. that would be the ma bell telephone monopoly, the three television networks, that together control the airways in the evening news, nbc, cbs and abc. the old folks will remember them. [laughter] and oh i should mention the pentagon, the federal communications division, the department of commerce and powerful quarters in the richard nixon white house itself. in a few crowded years tom and his merry band dispatch them all with a competitive open skies policy in place of a post office style communication satellites monopoly. with the first launch of a private commercial satellite in
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1974, with the manifesto and government industry accord that laid the groundwork for a cable system that was no longer a long extension cord for broadcast television but instead a robust alternative with hundreds of channels suited every taste and interests. and it would be essential first steps towards today system the universal 24/7 wireless, voice and data communications, practically available to every home, office and handbag on the planet. tom was working in a white house where intellectual bandwidth was appreciated ,-com,-com ma dominated by the likes of henry kissinger, daniel patrick moynihan, george shultz, arthur byrnes, james questions are. in his company's reputation had risen so high by the spring of 1974 that he was tapped to chair the secret effort to plan an hour-by-hour transition of government in the event that
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president nixon should resign his office to vice president ford and effort that even they did not know about or in any event did not acknowledge. and then, this exception -- the secession accomplished tom walked away from it all, never thinking to parlay the prestige and connections of public office into a look rid of private purge. instead, he began afresh, taking his talents for creative destruction to the business world where he saw more clearly than others that his new policies that opened new avenues for radical innovation. as founder and president of hughes communications his galaxy satellite system pioneered the now standard model of cable tv providers owning and managing their own space-based distribution channels. and then he conceived, founded and chaired cornet ses asked her later on and the little
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luxembourg, today one of the world's two largest commercial satellite companies along with -- bear, he pioneered the idea of direct to consumer small dish satellite communications which all the smart guys that could never work and ingeniously used use the scheme of national allocation of the electromagnetic frequency spectrum to obliterate the european state television monopolies that the allocation system had spawned. tom's business career recapitulated his government career and at first baffling and confusing the status quo establishment and then transforming it. he died at the age of 69, much too young but hey it was 2008 and the new world of pluralistic, democratic, dynamic user centric communications was a reality and already he was
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busying himself at the next margins of disruption such as promoting internet freedom totalitarian nations. tom whitehead's voided and small-town kansas was devoted to photography, ham radio rocketry and chemistry. as an undergraduate at m.i.t. in the late 1960s -- 50's, he spent 10 months working on experimental electronics designs at bell labs in murray hill. his bachelors and masters masters degrees were in electrical engineering but his interests were turning to economics, systems and decision analysis and defense policy. these led to several years at the rand corporation and in the u.s. army working on an array of projects ranging from spacecraft designed to biological texan systems and to a ph.d. at mit's sloan school in 1967. the next year something
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surprisinsurprisin g happened. he was asked to direct budget policy issues for the hubert humphrey presidential campaign. this approach reminded tom that he had actually regarded himself as a republican. he politely declined the offer and offered his services instead to the richard nixon campaign. during the nixon transition in late 1968, he worked on defense and budget planning and an obscure attic on lafayette square with an elite team that included allen greenspan, john deutch and james wilson. during his first year at the nixon white house he became increasingly concerned that the federal communications policies were suppressing technological innovation and conceived of the idea for special white house office to break the logjam of hcn commercial protectionism. he sold that notion but floundered on the task for
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finding the right person to head the effort. reluctantly, and over the objections of many colleagues and mentors who saw tom's future as a defense strategist he agreed to take on the assignment himself. one indication of the force of tom's intellect and character was the extraordinary quality of the individuals he attracted to the new office of telecommutelecommu nications policy. a all young law professor from the university of virginia was interested in rekha trade policy and antonin scalia signed on as general counsel. a young journalist and hill staffer brian lamb as director of media and congressional relations. they are with us this evening. three other preeminent ot -- opt veterans will begin our panel presentations. henry goldberg who succeeded justice scalia as opt general counsel is one of the deans of american committee cases law and seems to have been present as
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advocate or consiglio harriet every possible development in communications law during the past 45 years. dale hatfield who could actually talk trans-bonders and switches and spectrum with the boss went on to a distinguished career in academic government. he was active director of opt successor office in the commerce department and chief of engineering and technology at the sec and during his consulting days working with tom on a variety of business ventures. bruce owen, opt's chief economist and ardent economic conscious was the key architect of the bell system's breakup and telecommunications deregulation followed a highly successful career as a consulting economist he returned to his alma mater at stanford where he is now doyle centennial professor of public policy and a senior fellow at the stanford institute for economic policy research.
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following these three initial presentations, we will hear from global entrepreneur stephen koltai, tom's partner ann revolutionary at ses astra, and man whose career is than venture capital management consulting the entertainment industry and governmengovernmen t service and shows no sign of showing down. the concluding presentation will be by thomas hazlett repressor of economics at george mason university and one of america's most penetrating and prolific scholars of telecommunications policy. professor hazlett was tom's colleague and friend during the latter years when tom was a distinguished visiting professor at george mason and an active participant in professor hazlett's information economy project. for more information better speakers they will speak in turn beginning with henry gold erred. [applause]
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>> thank you chris. thank you very much market. it's an honor to be on this panel with my old colleagues and friends. it's a little odd to be on a panel in which the youth point of view is tom hazlett. [laughter] but be that as it may i have the leadoff speaker, presenter and my preface is to discuss the significance of tom whitehead's career. in short, why should anyone care about his papers let alone want to read them? well he had many accomplishments i want to focus on the ones that not only had a profound influence at the time but also made a contribution from which we benefit today. it turns out that all of these
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accomplishments involved video services, although they had an impact on other telecom services as well. ..
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a 12 channel cable system was state-of-the-art. it contrasts with the world we have today. a world with a fusion of program channels from a variety of sources with a variety of technologies, representing many viewpoints. the world in which new technology is welcome and new competitors, if not completely welcome by incumbents, are at least the goal of policymakers. i'm not saying that tom whitehead is responsible for this. you decide. like archimedes with which if he had a place to stand he could move europe, communication satellite technology was tom's way of doing it. most of his successes and lasting contribution have to do it technology. not skateboards, mind you. [laughter]
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satellite technology was the ideal technology for time. solve the most if not all of the problems that titus to the constricted telecom world of 1968. communication satellite is like a very tall radio talent. it can transmit to a receiver and has a lot of bandwidth. it can carry lots of signals at a relatively low cost. tom whitehead perceived as from the tasks that he had not opened up the telecom industry to new tv program opportunities and opportunities for competition, and new services for consumers. in order to do this, he started with a very simple idea that we call open skies. this was a policy that held that any technically or financially qualified company could launch a
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communications satellite. in one stroke, adoption of this policy led to the entry of new satellite carriers. because of competition, nationwide connections were affordable for startup companies creating new cable program networks. like hbo and espn and mtv had ted turner's networks. it even inspired an entirely new network console called c-span. soon kabel offered much more than just regular tv broadcast signals. in the channel capacity was expanded to carry the programming. today, broadcast network is as good as cable. this is a far cry from the ca tv
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signals of yesteryear. it has a radical notion, that a competitive telecom market place could deliver much more to consumers in a regulated one. once outside of government, whitehead put a further spinoff technology with his huge galaxy cable shopping center. instead of doing on a it on a first-come, first-served basis, he dedicated a satellite to the most attractive program network. so that cable operators could use one dish to pick up the best networks. that is not only cheaper and easier for cable operators, but it added enormous value to the satellite capacity itself. all of the programmers wanted to be honest and on us and they paid a premium to be on the
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honor. it was no longer just a delivery pipe, it was a programming resource with a value greater than the sum of its past. tom carry this value proposition one step further with the cornet project for europe, which completely overturn the established order of state-run broadcast services and relied on private enterprise and commercial program services to give to the public in europe a new kind of television. so let's go back to tom's simple idea. the idea was critical. but the idea alone did not lead to the revolution we have witnessed over the last four decades. before there was the idea, there was tom's commitment to change. then there was archimedes place to leverage that idea and to stand upon. but for him, the place to stand
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on is his position of influence. the open skies, it was nothing less than that. for galaxy, it was being the leading satellite manufacturer. and for astro, it was chosen by the duchess of luxembourg personally. this perfect storm of commitment to change, a simple but powerful idea, a position of influence, we have to add another factor. tom's dogged dedication in pursuing change. his willingness to take a risk for change. in short, his courage. that quality has always been in short supply among our policymakers. but he had a ton of it. and it made all the difference
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in achieving his success. the fact that this perfect storm had occurred in a person like this. [laughter] is truly extraordinary. on that note, let me get back to the question that i opened with. what is the significance? is tom whitehead responsible today for the telecom world that we have? i went through with a thought experiment. what a satellite technology did not exist. it was gone. from no low-cost high-capacity nationwide worldwide networking, what we have had cable networks? public affairs networks? international networks? i think not. the next experiment is satellite technology, but no tom whitehead.
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in that case, we would've had a monopoly in the u.s., just like we did with other straight out was the policy alternative that we were facing. we have had the same abundance of choice and innovation with a monopoly industry model? i think not. would we have a cable industry competing with telephone companies today? again, i think not. the telecom world we have had today is not inevitable. change was not inevitable. people make a difference. tom whitehead made a difference. thank you. [laughter] [applause]
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>> i first met tom in about 1970 around the time that his policy was formed and tom became the first director. my connection to him was initially working with him at the radio laboratories at the department of commerce in boulder. as i recall, walter had worked in the white house under a commerce technology on the science fellowship program. that is where he met tom. i don't remember my first meeting with tom. but at the time, i was a very junior analyst and a small group within the labs that supplied support to ott, in connection to the president. i don't recall the details, but
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i do remember that we seem to hit it off pretty well. we were both almost exactly the same age. we were both born in 1938. we were both from the midwest and very early in our prospective careers. as i will say, i will have a little bit more to say here in a moment. we were both licensed amateur radio operators, or hams. not surprised, i was totally fascinated by his intellectual capabilities. but also by the fact that we were the same age, he had already worked in the white house and was now heading up the white house agency dealing with critical issues of public policy. i think tom and i hit it off pretty well, beyond the three reasons that i just mentioned. he had a doctorate from mit as
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margaret mentioned. the latter included, among other things, system analysis, operations research as well. i have an undergraduate degree in electrical engineering, plus a year of additional graduate study in operations research. operations research is the term that is applied use of quantitative mathematical models in decision-making. as we both shared a background in management science and operations research, especially when applied to issues of public policy. that shared interest is not the point that i would like to make her this evening. the point i would like to make is that in establishing ott, tom created an environment built around using serious and objective and economical analysis to inform that
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indications policymaking functions at a critical time in american history took place. a junction where we would continue the communications and embrace our more traditional reliance on open entry in the competitive free enterprise system. at that important juncture, it was a division that lend themselves to technical and economic analyses, if you will. in the case of open skies, there were enough parking spaces to accommodate competitive entry also. they were not enough parking spot, but likewise committee
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argued that the propelling economies or scale for natural monopoly characteristics associated with the network and it would make competitive entry inefficient or unwise from a public policy perspective. a similar question and other crucial areas, such as the innovations market and the satellite mobile radio field, as i would look around the audience, i see so many people that were involved and played key roles in these studies and these issues. the contribution was not just a policy recommendation themselves , as important as they were. but also establishing an environment conducive to economic research and protecting
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people in the trenches from political interference. part of the legacy in terms of supporting technical and economic analyses, indeed in their research more generally, lives on in the form in the policy research conference or tpr. tprc is an international group, nonprofit organizations to challenge each other's ideas and to meet with members of the policy sectors. the first trip was organized by ott in 1972 and tprc recently held its fourth anniversary conference here in december. i believe by any objective measure, it is one of the premier, if not the premier
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conferences on innovative policy research internationally, as well as domestically. during his tenure, it is my understanding that time was instrumental in getting the early funding from the conference. as i mentioned earlier, tom and i both shared interest in ham radio. we both had interest in the federal communications commissions in our early teenagers. i have communicated with both margaret and tom's sister, susan, and learned more about ham radio, and the essence of
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amateur radio is the use of radio communications as a hobby so i can play important roles in times of disaster and so forth. there are two important aspects of amateur radio that i think are relevant. one is being able to communicate with other amateurs but close by and around the world. the other is providing an opportunity to build and experiment with the associated radio equipment and systems. tom's grandfather had been on a railroad line in oklahoma. i find this fascinating. tom used his grandfather's old telegraph dear to communicate with other ham radio people. it confirmed the contacts that he had with them. he also built some of the necessary equipment, experiment
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and with that and the associated antennas. it gave him an early hands-on experience with the radio before his formal training in engineering at mit. i understand that the charge given to the panelists provides further context and color to the fiscal records running them. as chris put it in a message to us, it is part of government business and economic development. i cannot speak to his boyhood experiments with amateur radio, i am convinced that his ability to allow him to communicate with people far beyond his early home in kansas and it played an important role in deepening his technical understanding and issues involving communications of all types. broadcasting, cellular, microwave, satellite. my allotted time is about up.
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the minute that i have remaining, i would like to touch on the works of tom after we both left government. i worked as a consultant when he was doing the galaxy satellite program. after that, my consulting firm and i were heavily involved in the national exchange. the national exchange was attended to provide vacations services in the united states using technology with a novel method of indication tracking among the many small earth stations. i also worked with tom on a number of his projects when he had his own consulting firm. while i feel much honored to have been associated with him at ott, i feel especially privileged to have participated more closely in some of his later ventures.
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he had a great penchant for technology and public policy. through those ventures, he changed communications here in the united states and all of the world. thank you. [applause] >> thank you. it is a pleasure to be here and to see so many old friends. it is good to be back here in washington, with the rain and the dampness. we are here to celebrate tom whitehead's many ideas and accomplishments. i'm going to focus on just one
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of them. it is the breakup or the beginning of the breakup of the bell telephone system. the first, i can't help remembering that i came to washington in the summer of 1970 as an economic policy fellow from brookings, still damp is not wet behind the ears as in economist. i have two choices. one of the choices was the general services administration, which i had never heard of. [laughter] the other was to work for somebody named clay whitehead in the executive office. it was a very tough choice. [laughter] i went to meet tom, who is still, at that time, grandly ensconced in the old executive office building.
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[inaudible] so i gave up my dream job with gsa and became the last new employee of the old office of telecommunications management and one of the first new employees of the new office of telecommunications policy. executive order 11556, establishing otp. the word change was from management to policy. you are a heard a great good deal about this. it was largely attributable to tom whitehead. i actually secretly thought that tom hired me because he wanted somebody in the office was further out on the scale than he was.
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anyway, i initially said tom was eventually forced to move. my desk came equipped with a bell system lobbyist. [laughter] and his name was martin holton. his job was to take me and others to lunch once or twice a week and provide homey anecdotes of telephone more. i was not singled out for this honor. marvin came with the desk. now, marvin was not an ideal fit for me. he didn't know anything about economics, he tended to gape in disbelief when i extolled the
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virtues of competitive enterprise or daydreams of the specter markets. he never quite got comfortable with my paying for my own lunch. i always suspected that i had to pay for his. he was devoted especially to the aesthetic appreciation of electromagnetic old telephone switches. he quietly confided to me that his favorites which was the number five crossbar. he would, to the ranks of southern belle. i often wondered how he went about tracking his report of our lunch conversations. all i gained from the exchanges was wait. after a while, i stopped accepting the invitations. i never lost the weight.
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[laughter] more competition and less regulation would be a good thing, i thought, with these customers as well as others. as in the the executive order, he aimed at poor and less government management. at that point, tom had already embraced market competition with respect to domestic communications satellites. you have already heard a good deal about this. as the director of otp, he used the bully pulpit to promote market solutions and deregulation in many other areas of telecommunications and our testing. either the established industry order telecommunications industry reacted to warmly. most were implemented during subsequent administrations of both parties. effects was revolutionary.
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one was the breakup of the bell telephone system. it had emerging competition in telephone equipment manufacturing and long-distance service. the bell operating companies had no economic reason of their own to oppose long-distance competition. or equipment competition. their opposition, which extended in some cases, even to sabotage competing suppliers of these services, it was created by the simple fact that they were owned by a company, but also by those two monopoly enterprises. it was not rocket science to see
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that the incentives were mis-structured. the policy solution seems perfectly clear. change the structure that gave rise to the bell operating company. one of my numerous, naïve, and temperate policy memos was sent to tom. he had the audacity to routinely label them inflammatory. [laughter] i think he has outdone me. [laughter] the memorandum suggested that otp sent a letter to the antitrust division, urging the revival of the 1956 monopolization case against at&t, which had long been settled. tom wisely suggested that i go over to doj, for a chat with his
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friend john baker. who had been deputy assistant attorney general. on doing so, i discovered that the antitrust division was already pondering the revival of the 1956 case, but had not considered the long-distance monopoly. from that point forward, otp supported doj's investigations behind the scenes, and doj filed its famous case in 1974 over general saxby's signature. now, it did take a decade and several americas for the case to conclude successfully, but in the end, the bell system caved and accepted as a settlement of the case, the exact request of relief that the government had entered in 1974.
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today, the telephone equipment market is highly competitive. long-distance service, voice prices are close to zero. even local companies -- telephone companies face competition. more probably, one of tom whitehead's most important insights was to see the benefits of competitive markets, not simply in terms of lower prices were more diverse quality options. before the effects on technological innovation. for example, as you have heard, in pursuing his policy for domestic satellites, tom was following the potential of the competitive satellite industry to simulate stimulate innovation in the distribution of video signals to and by cable systems. the results were an explosion of video programming supply, hbo, cnn, and eventually c-span.
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sorry, brian. [laughter] >> this permitted cable penetration of urban areas. it had been previously confined to rural areas. this surprised ship was far more than the resentments of richard nixon or even otp's structural schemes to determine and undermine the autolock realistic hegemony of the networks. the breakup of the old bell system. i think that it was highly doubtful that bob is associated with digital technology applied to medications, such as the internet and broadband services, would have occurred so swiftly or perhaps at all. but for the disintegration of the bell system monopoly. although not a turn at the time,
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the bell system, in partnership with its regulators and notwithstanding at bell labs, had systematically targeted rather than promoted the adoption of new communications technologies. in successfully promoting a new communications freedom, the freedom to innovate, tom whitehead made an enormous contribution to social well-being, not just in the united states, but on a global scale. thank you. [applause] >> tom whitehead, audio book, chapter four. [laughter] first, i just want to thank
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margaret, clay, and abigail, for inviting me to be here today. i was a part of a small but important part of his life. tom was a very large and important part of my life. in november of 1982, i met a man who would change my life in ways i couldn't imagine. he also happened to change the lives of hundreds of millions, probably billions of people around the world, enabling them to receive tv and radio and data in ways they never imagined. at that time, they were the old and sacks of their day, the solomon brothers. these were the years of liar's poker, which was written about solomon brothers i was told to
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be present for a meeting with a really important. he had been a client of the firm, they would participate in the financing of the galaxy. several people were listening to a mild-mannered, soft-spoken, extremely low-key guy from kansas. talking about how easy it would be to buy a satellite, launch a rocket, disrupt the multibillion dollar european tv industry, and by the way, he had no backers are partners, but only cost $250 million. and it's in the grand duchy of luxembourg, which contrary to everyone's belief, was in fact, a real place and not just the setting of the book, "the mount that roared." everyone said, good luck with
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that. on the other hand, i leapt at the opportunity. my boss and other colleagues in the corporate finance department, being the one supportive group that they are actually turned out they were right. i did leave to become tom's partner and move. at the time i lived in luxembourg. there was one highway they took you there. if you are driving to brussels -- from brussels, you could actually only exit in luxembourg on the southbound lanes.
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he had to be especially careful because the exit was actually in this frame of mind. you needed a passport to enter, but i didn't care. i was young and single and spoke fluent french, passable german, and could pretend to speak german with a french accent. what mattered to me, and there were four restaurants in the capital city. i was going to live for a year in the room at the holiday inn. i had every single item on the menu at the holiday inn luxembourg airport. the highlight of my time at the holiday inn.
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[inaudible] in addition, there was travel. luxembourg was the only country in europe at the time not a member of iota. there were places they could not serve like havana and mask -- moscow. i started most days by driving in the fog, dave very much like today. through either brussels, paris, or fred for airport and flew on from there. each of these was a two to three
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hour drive without the autobahn. i would return at midnight and then have a three hour phone call with tom whitehead, who was living in sunny, brentwood, california. then there was the excitement of working with enabling governments, media. for example, the day we or it incorporated -- the day we were incorporated within 20 minutes of filing our corporation documents. that was day one. we worked very hard for two years. we found the first investors and channel users and we built a staff. i hired the first employee who later became part of our crew.
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we put up with comical harassment from every quarter every day. and every night, i called tom. our story was the stuff of a hollywood movie, and i should know because i was at warner bros. for almost 10 years. in the end, we pioneered an extraordinary change. as chris asked us to do, here are some of the most important highlights of that episode of the tom whitehead story. one is that we show that small countries like luxembourg had no proper way to exploit those licensed lobster commercial companies, much as government had long licensed the radiofrequency spectrum. today, successor company fts is the second largest employer,
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which is, by the way, the country with the highest gdp in the european union. number two is that tom had entrepreneurial skills to come up with the idea that small, 90-centimeter dishes, plus the band satellite could revolutionize and make mass markets satellite television. number three, tom's vision opened the doors to commercial television in europe, and later around the world. in most places, where only state monopoly television have existed. this changed the exclusive ability of governments and politicians to control the airwaves. ironically, while we were called the coca-cola satellite and the trojan horse for american television, actually all of our first channels were european startups, like itv. later, regional startups like al
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jazeera. number four. we created the grand duchy of luxembourg's most successful business. in 1985 it began. by 2005, the models for satellite business had become the world's second's largest private satellite commercial company, with respect to revenues and the number of satellites that operated today, numbering 52. at fiscal year-end 2011, fts had reported revenues in excess of $2.2299 billion of the planet
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earth. it was the right of a lifetime. tom was the role model and more. he was a father. he was a friend. he has inspired me all of my life, and indeed, including to the work that i do today, which is the promotion of entrepreneurship around the world. my tagline is world peace for all partnership. i think about tom and our mission everyday of my life. [applause] [applause]
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>> i will be texting, tweeting and blogging as the youngster during our talk. [laughter] i am deeply honored to be asked to speak here on this august occasion. if that is not a cause for alarm, i will be brief. [laughter] the papers of clay whitehead are quite something. i look forward myself to diving into them, learning more about that pivot point in u.s. history in which tom played such a central role, commanding advanced deployment that was both exciting and politically dangerous. the library of congress promises
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this to be a treasure trove for scholars seeking to understand the emergence of competition in the communications sector. the forces that oppose it, the institutions that resisted it, and the policy entrepreneurs who ultimately made it happen. this we will add to our knowledge is the social bounty it had yielded, and astonishing economic change that it continues to rain.
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lenny used the line, communism is a drag concluded very quickly but only one firm or market could ever provide this natural monopoly service sought to
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compete with broadcast tv by regulators undermining license in were not especially controversial. for by the and wireless services. uniquely dependent upon a mysterious and delicate coordination process that can only market forces not nearly so
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the liberation fellow blessed
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clay whitehead new satellites slacker prices for transmission of data, voice, and videocreated new markets. markets not anticipated. this indeed triggered a tsunami and tidal wave that crashed in the markets that lay beyond satellite. it directly brought cable tv competition in to video. it also served as proof of concept demonstrating the not only was doubting the monopoly status quo safe, it could produce walloping social gains. that draymatic innovation. thinking about how the
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communications world ought to be structured emerged in awe of the new new social architecture. one never seemed like such a large number after the skies were open to competition. tom whitehead's vision is moving marnghts. thanks to liberalization of wireless that follows, rivalry now controls the use of mobile air waives. no regulators could have imagined or would have authorized the blackberry, the iphone, the ipad, the android, on star, kindle, or the evolving machine devices used on gas and truck fleets and trays chip that your pet. intense complexity. competitive forces in mobile services have created stunning depth and breadth in the marketplace. wireless is indeed as has been
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mentioned the poster child for creative direction. i noticed a wall "the wall street journal" story headlined about what was going dominate the mobile landscape in the coming year. the entire article was about google, microsoft, apple, and facebook. not one of these firms owns a fcc wireless license or base station. yet now entire commercial empires are floating on the spectrum markets made possible by those who, when others could not, saw the competition could work. i thank tom whitehead for his contributions to our world, and i do not blame him for any of the thousand of text messages our ninth grader might be producing even over a one to two hour period. [laughter] omg.
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[laughter] that's the 400 of the texts right there will there's only so much vision that can be contained in one man. i will not blame tom for this. i am delighted today with the amazing dedication of margaret whitehead in organizing and cataloging and indexings and really loving this documentary record. historians, economists, political scientists, policy makers, and all students of communications may better understand our modern times and the world to come. this work now available through scientific inquiry through the library of congress. we ill lute nate new insight thank you, kindly, mr. and mrs. whitehead for the magnificent contributions to the american people and scholars everywhere.
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[applause] [applause] thank you, gentleman. i'm going see if members of the panel have anything to add. i'll given when they heard others say. i'm going start with a little point about the value of this tremendous reflection of papers that margaret has put together. as i was preparing for today, i was going through some of the papers that are in the collection, and i came across a something that tom wrote a few years ago. based upon talking with people that were working with tom at the time that the at&t antitrust
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case was brought in 1974. i'm sure that tom had strong feelings about the merits of the case, he worked with bruce owen and others, but in 1974 within justice department was proposing a prepared complaint to file suit against at&t. and was giving the white house a heads' up and implicitly looking for some sort of a high sign or approval. this was a momentous step. it was different from file ugh a policy paper or encouraging deregulation at the fcc for all of the expwroaks about -- jokes about the bell system. it was an important national institution. important interests in washington incoming the pentagon, were dead set against destructing it.
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it was a vital part of the american infrastructure. this was going to be a grave step. and this is what tom reports. not something that tom said, but somebody with him at the time had said as the word went around the administration, word came back from secretary of the treasury, george, and secretary schultz said i want you to know that i would like to request that we defer filing the suit until the next treasury bond auction because at&t also has a bond auction coming up. they actually sell more bonds than the american government does. this will royal the market and complicate what we are up. that was a standard thing that goes on at the government. but tom looked at that, and he
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thought if the united states government in the financial operations has to tiptoe the way around the bell system, something is wrong. and he gave a -- [inaudible] that's the kind of -- that's one of many, many nuggets you get in going to the tom whitehead westbound. i want to ask henry, dale, bruce, we've had a lot to say. i'm sure the people in the audience would goat a word in. if anybody would like to comment on the other presentations, please do so. >> one thing occurred to me, and it's really a question for my fellow panel lists and the audience, really, everything isn't perfect now in telecom. if tom were with us and functioning in the spirit he always functioned in, what would
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he point to or try to change? what development would bother him very much about what we have today? does anyone want to take a crack that the? >> well, i'd be glad to. i'll be glad to impute my views to tom. [laughter] it seems -- [laughter] the biggest problem from an economic point of view in the telecommunications business is that the spectrum remains largely noncompetitive. it's not allocated by markets, it's mostly controlled by the government. of course, in the areas of mobile telephone service, it has been largely deregulated and turned up to private markets. it's subject to fcc regulation. but there are a huge areas of the spectrum where that's not true. chiefly, for example, the
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broadcast spectrum. and the world, at least the u.s. economy would be much better off and larger if the people who through their political contacts continued to control that spectrum, went somewhere else. i'm now studying corruption in government. that's the only way left. >> what he said. i agree completely on the spectrum issue. >> let me also say in the years since 1973, we solved the problem of individual corporation having larger boptd -- bond issues than the united states. that's been taken care of. we have worked on that. [laughter] the -- one thought probably, which y -- which is why i asked the question. i sat for months and months and
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months working with tom on the cabinet committee report on cable television, we don't call that as one of his great successes, nothing much happened with it. but one thing that concerned him lead to a policy recommendation on the cabinet committee report was vertical integration of the pipe, the cable system with those who were program forking the cable. and -- program forking the cable. we proposed a policy called "separations policy" henry there was familiar with the separation policy. we didn't want to call it this, it was a common carrier policy. if you controlled the pipe, you couldn't take advantage of the gate keeper control, and
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disadvantaged people competing with you for programming. it was a concern to tom that was a recommendation in our cabinet committee report that wept absolutely nowhere. i think today if he saw the extent of the vertical inte dwraitions both in the wireless world and the cable world he would have wanted to do something about that. >> i agree. i think he would be dispainted at -- disappointed at this point that we have not had a little bit more robust competition in the local area than we do. that may reflect my own bias a little bit. [laughter] >> the issue of vertical integration is controversial in the trust circles. but i think the most conservative position is that vertical integration is almost always a bad thing when one of
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the companies that is vertically integrated, one of the different stages of construction is a monopoly and not otherwise, okay at the -- time of the cabinet committee report on communications which was the same time of the beginning of break up of at tissue, the assumption which turns out to be wrong, the assumption that the local system was natural monopoly and we were; therefore, dealing with vertical integrations by a monopoly to competitive upstream businesses. and in both cases, otp was consistent in proposing that the monopoly on the assumption that wasn't monopoly, not controlled vertically integrate to the competitive upstream businesses. okay the facts changed our perceptions of the facts changed. and local communications communications is no longer a
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natural monopoly. not as competitive as we would like. the cable television service that is providing the service and competition with the telephone company and there are mobile communications competing in voice service and to some extend broadband and that increase. there's some competition. so the assumption that vertical integration is now still a bad thing simply doesn't work. maybe it is. it's an imperial question. you can't assume it's a problem. are we allowed to disagree? [laughter] we're waiting for you, tom. [laughter] >> if there's a rule against that, you wouldn't have invited me. [laughter] okay. >> when it comes to vertical integration in the wireless marketplace, i was surprised to hear dale say he thinks tom would have been disappointed. that's why i mentioned the
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wireless marketplace. and, you know, there's not a debate. the biggest player in wireless today in terms of profitability market power is apple. they don't own any wireless networking. theycom to the space as an innovator they are drawing enormous economic resources from the carriers. there's a wonderful battle there, if you love the disintegration of vertical integration, and bringing benefits to consumers of incredible proportion. i think that's working pretty well, and, you know, bruce has the economist slant on this look as an e efficiency issue. -- illegal urnt the antitrust laws. we're not seeing those cases filed against companies like apple for a good reason. the competitive marnght is working very well in that count. that's my take. >> tom, you shift the argument
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depending on the property kl. i don't think i would argue for the prospect call -- that's very competitive. the issue is how many fiber hoops we have out there of concentration and to me that is still problematic. i mean, i'm not saying there isn't people out there trying to do it but that's what concerns -- that's what concerns even your wireless. you know, you go 90 percent of the way on the fiber and you go the last few hundred feet on wireless wireless networking is not really a wireless networking. it's a fiber primarily a fiber networking. that's the part that concerns me that there may be a some residual marketplace that we need to address. >> good. >> even i . >> thank you very much. and that was the final part of our panel planning which was to give the audience a feeling of what staff meeting felt like.
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[laughter] >> this is way too -- [inaudible] [laughter] >> i now want to see if there are comments, questions, additional commentary from the audience. we have a distinguished group of people here including many associates of tom's. many people who have worked at very high levels on the problems we've been discussing up here. we have a rolling microphone. ly call on people, if you can please wait until the microphone arrives and introduce yourself and make your comment. [inaudible conversations] >> i'm bob. a friend of tom and margaret and
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also, i consulted with tom on some legal issues. i have to say that one thing that impressed me about tom that showed his true character and his dogness was the fact he would not settle the suit in lucks m berg and -- proceeded to the supreme court and won. i think it's more indicative of his character than anything else he did. [inaudible conversations] >> no disagreement. >> no comment. [laughter] walter burns. -- [inaudible] i spent time in the office a number of years ago -- [inaudible] [laughter] [inaudible] at any rate, i'm going say something about the telephone system when i was young boy in chicago in the 1920s.
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we had a phone. we had a -- [inaudible] we had a box of nickels so we can make the calls. at the end of the month, the telephone company man would come around and empty the box and get our nickels, we would give him a $1 to get twenty nickels back and hoped that lasted us the month. iwhat a change in the world. [laughter] [inaudible] [laughter] thank you. david maxwell. john and i are very different than -- i wanted to say it's i spent a lot of time with tom at the end of his life, and he -- it's been referred to by a
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couple of the speakers, but he was passionate about internet freedom and very much involved, i think in a behind the scenes way with trying to promote internet freedom particularly in china. so i just wanted to make comment that that was typical of him he moved on to a new issue that engaged his tremendous mind and passion. >> my name is bob lablance. i was the last person interviewed to become the
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director of otp. you can see how well i did. tom took the job. it's obvious he knew what to do and i didn't. but aside from that, we became fast friends until the last almost twenty five years. we would direct mutual funds and i must say bringing the insight he had at the intelligence he had was to the benefit of the shareholders of the mutual funds. i can't tell margaret and everybody how much i miss him and love him. thank you very much. justice scalia. yes, sir. >>. thank you. >> first general council succeeded by -- [inaudible] i want to make two points about tom. the first one makes me happy.
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i'm a disorganized person. length of time tom was very -- [laughter] tom was very disorganized. [laughter] really needed somebody to keep track of his schedule and his his offs and everything else. it gives me great hope. [laughter] to keep trying. >> the second thing. yes, he was a man who had great things in mind, but he was also a very practical man who could pay attention to smaller things. the first job he gave me when i became his general counsel was asked me to fix a traffic ticket. [laughter] [laughter] e regret they had to tell him i could not do it. [laughter] [applause] [laughter]
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[inaudible conversations] >> i think it's time to move on to the reception. first we're going have final words from margaret. speaking as the designated moderator of the panelists, i want to thank these five gentleman for exquisite work they did. [applause] [applause]
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[inaudible conversations] [inaudible conversations] thank you. where is doug? behind -- [inaudible conversations] [inaudible conversations] to our -- [inaudible conversations] it's a wonderful, rich feeling. i know we will remember the time
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-- [inaudible] and all of you. thank you so much, and i think you can gather from listen together panels that these relationships that we have heard about have been meaningful, i think what mattered to tom was getting things done and obviously to these people as well. and i think that the bonds formed around that were just really exciting. it was interesting and in some cases historic. i think you can see there's a great deal of humanitarian around the panel and -- [inaudible] making in washington are real people who have gone to a great deal of to prepare themselves and have so much to say and contribute. i thank each and every one of them. especially our moderator. thank you all so much.
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[inaudible] i look forward to the reception. we are having a stand-up dinner. so -- [inaudible] [laughter] thank you. [applause] [applause] tonight here on c-span2, senate minority leader mitch mcconnell talks about about what he hopes to here in the state of the union address. ..@ fellow
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citizens, as we gather tonight, our our nation is at war. our economy is in recession. the civilized world faces unprecedentedte dangers. yet, the state of our union has never been stronger.ause [applause] >> it is because of our people and our future is hopeful in ou
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journey goes forward. and the state of our union isaio strong. ,t tuesday, president obama later, it'ss year's address live on c-span2. of with our preview program starting at 8:00 p.m. eastern and the president at 9:00 p.m. followed by the gop response an your reaction. the state of the union is tuesday night on c-span. tuesday, the senate armed services committee holds two hearings. first at 9:30 a.m. eastern, military leaders testified about the potential impact of budget cuts scheduled to take effect on march 1. see it live on c-span3. then at 2:30 p.m. eastern time, the committee meets to vote on the nomination of chuck hagel to be the next secretary of defense. live coverage also on her companion network, c-span3. >> i think we hold him up as
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this amazing feat. we look at what happened afterwards and we see how incredibly difficult it was an decisive in some ways, but also that you had this progress after that it was seen as a great victory, but it's also seen as what we did not accomplish yet. so when i was looking at the segregation disaggregation and how it was finally implemented 20 years later, the way these programs are set up still maintains this privilege. >> sarah garland chronicles the lawsuit brought up to challenge school disintegration. in her book, divided we fail.
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part of presidents' day weekend on c-span2. >> monday, senate minority leader mitch mcconnell spoke about what he wants to hear about health care in the presidency of the union address. this is five minutes. >> over the past few weeks, i have come to the floor to urge the president and democrats to act on the huge fiscal challenge facing our nation. starting with the obama sequester. unless senate democrats allow a reasonable spending cut alternative that passes this chamber before march 1, the president's plan will go into effect. the legislation averts the obama sequester months ago, but senate democrats have yet to pass an alternative bill that could actually go to congress. in fact, it took them until this
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week for them to say that they would do an alternative, indie and the alternative they have come up with is clearly, clearly designed to fail. they knew this was coming more than a year ago. yet they still haven't put forward a serious raposo of replacement spending cuts. what a colossal waste of time. at the beginning of the year, democrats promise that things would be different. they promise to get their work done ahead of time. instead of five minutes before the deadline. instead we find ourselves in familiar territory. it goes something like this. republicans identify a challenge and propose a solution well in advance some gimmicky bill is
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designed come and then in comes the final act. frankly, this whole routine is getting old. maybe i am wrong. maybe the president and his democratic friends are willing to break the cycle this time. because if so, my party has said from the beginning that we would much prefer to replace the obama sequester with smarter spending cuts and reforms. even though republicans already passed legislation to solve the problem a long time ago, if the president wants a different solution, he can call his own. that is fine. we are happy to give him the credit. but however we get it done, the time has come to take on washington's spending problem. in a bipartisan way, especially.
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that means that the president will actually have to move beyond gimmicks to propose real spending reductions. spending cuts have are even agreed to by certain parties. remember, we have agreed to reduce this amount of spending in october of 2011. without raising taxes. we have are any disagreement. the question is, what are we going to do about it? i think the democrats continued avoidance of the responsibility to deal with their economy and future lies ahead. i strongly suspect that instead of bipartisan action, the white house will subject us to another campaign blitz. frankly, i could write the scripts myself.
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he himself, the president, refuses to get rid of. he will be told that he has no choice but to for low civilians and to order a battle carrier to stay at home, which would diminish our presence in the persian gulf. the reality is that he has responsibility as commander in chief. let's be clear about something. the president does choose to do this to the hearts that he says that he cares about, that is a decision of his own. i hope someone on the stage taps him on the shoulder and asks, mr. president, if you are truly worried about this issue, why aren't you working with congress that we elected to prevent it? it's a good question.
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and he is the only one who can answer it. we will welcome him to capitol hill tomorrow. will the president lay out a serious plan to avert the sequester, or simply use it as another excuse to fire up the campaign machine? if it is the latter, he will have to live with the consequences of his choice. now, another issue we have been reading a lot about lately is the consequences of obamacare. i could stand here and tell you that republicans warned about most of these things until we were hoarse. that we saw it all coming and said so. the higher cost, the higher premiums. the tax hikes. the lost jobs. and the potential for millions lose their jobs. the president dismissed that and he got his legislative one. the question is, what's he going
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to do to help folks that are predictions are coming true. will he be open and honest about the consequences of obamacare? will he use speech as an opportunity to prepare them, or will he simply ignored in hopes that people simply don't notice. these are just a couple of the issues that americans are worried about right now. i hope both are just tomorrow. this is a pretty broad agreement in the president spent most of his first term avoiding the issues that americans care about most. i am suggesting that he and i do the same thing this time around. mr. president, i yield the floor. >> the alliance for health reform held a briefing on monday for congressional staff members on medicare policy. members were given an overview of the program, including how it is funded, who are the beneficiaries, and what changes
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will occur once there is obamacare implemented in 2014. this is one hour and 35 minutes. [inaudible conversations] >> thank goodness i didn't tell that off-color joke while we were waiting for our next member to shore. hello, i am at howard with the alliance for health reform. i would like to welcome you. thank you for coming. on behalf of senator rockefeller, the board of directors, and everyone, i would like to welcome you to this program, which we think is a pretty important one. it is sort of the building blocks of the congressional debate about medicare. it is the largest federal health program in terms of dollars, covering 50 million people and the total cost this year
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approaching $600 billion. back in 1965, i first came to work on the hill in 1969. and i cannot remember a single year since then when congress hasn't done something important with the medicare program. this is a popular and expensive program that delivers health care to almost one in five americans, particularly those over 65 years old, and those with a disability. so there is a need for our policymakers to understand how medicare works. plus, substantial changes to the program and the affordable care act in 2010, and we will hear about those changes as well today. our partner and cosponsor in this briefing, the kaiser family
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foundation, it turns out some of the best, most understandable analyses of medicare that you will find, and the person who is responsible for a large part of that analysis, they are here today to comoderate this session, and i am talking about tricia neuman. she is a senior vice president at the foundation. she is director of the kaiser program on medicare policy. we are very pleased to have you and kaiser involved in today's briefing. >> thank you. it is great to be. i am so glad that so many of you are here for what we call medicare who can. we have some terrific speakers to provide a great overview of medicare, how it works, the challenges that the program faces, and i'm going to turn it over to them any minute.
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but first, we have something kind of fun for you today. i hope it's kind of fun. we are going to do the capitol hill release of the video that was prepared by my colleagues at the kaiser family foundation, which shows a history and timeline of medicare. it is short and entertaining, but it also provides a lot of information in a short period of time. without further ado, we will go right to that. ♪ >> and the depression, depression, the elderly were dependent upon sons and daughters. the sons and daughters were without jobs.
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>> it's not that people couldn't get good care, but they could not afford it because of hospital costs. the question was what to do about it. ♪ ♪ >> what happened was the 32 states adopted it. >> only half have coverage and most of it was very poor coverage. >> [inaudible] >> one of the traditional methods is very easy to disguise
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a medical care system as a humanitarian project. >> we haven't forgotten. >> ♪ ♪ >> the social security office was open to work. ♪ ♪ ♪ [music playing]
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single micro- ♪ single mother. ♪ ♪ ♪ >> we are not going to live in fear of catastrophic illness. >> ♪ ♪ [music playing] ♪ ♪
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♪ >> 100 and once that exceeds $250,000, they fall into the so-called doughnut hole. >> 39 million people have signed up for it. >> getting next year, we will include annual physicals, wellness exams, and mammograms.
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♪ ♪ ♪ [music playing]
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♪ ♪ ♪ ♪ [music playing] single micro-
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♪ ♪ ♪ [applause] >> okay, that was a little bit different, but we hope you enjoyed it. also, if any of you think it would be helpful for your congressional district officers were town meetings or anything in that regard, we would be happy to make this available to you. it is a quick overview and a nice way to explain things to people in a more entertaining fashion, as you can see, with akamai will turn it back to ed and the alliance and thank you for your time. >> thank you.
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there we go, if you'd like to take out your pencils now, we will get to the test. [laughter] >> some of the things that flew by pretty fast, you will hear a little bit more detail about. a little bit of housekeeping, there are lots of good materials, many of them from our colleagues at kaiser in your packets, along with biographical information for our speakers and the powerpoint presentations of those who got them some of you may be watching the webcast at this moment, ranged with the support of the kaiser family foundation. you can find at the webcast and podcast probably tomorrow sometime online, you can also reach them on a website and get all of the background materials
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through all health.org. that is our website. there will be a transcript of today's discussion. if you're watching on c-span right now, and you have access to a computer, you can find all of those materials that the folks in the room have at their disposal in print form on our website at all health.org. at the appropriate time, we would love to have you ask a question. you can do that either by coming to one of the microphones or by filling out the green question card. before you leave, we would appreciate it if you would fill out the blue and evaluation forms that we can improve these programs for your edification. we are going to hear from the talented and well informed panelists today. they will give some brief presentations, and then we will turn to your questions. now, you cannot stump this
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panel. feel free to try. but also do not hesitate to ask the most basic questions. because we know a lot of you are very smart, but very new to this topic and we want you to have a good grasp of the basics of medicare, which is the point of this briefing. we would ask you that you try to keep your questions aimed at the facts of the program, or the background of the program, and a little less about some of the policy disagreements that arise from time to time and on this program. with that, let me start on our panel. we are first going to hear from the associate director of the medicare project that the foundation, juliette cubanski. she is at the kaiser family foundation. she's an expert on medicare financing and the prescription drug benefit under part d. she has a doctorate in health policy from harvard university, and her task today is to give us a broad overview of this
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important program. we are so glad to have you back, juliette cubanski. we are glad to have you set the stage for today's discussion. >> thank you. as was said, i am juliette cubanski, director of the kaiser family foundation and michael here today is to provide you with a few simple facts about medicare. i have a lot of ground to cover, so let's get started. as you saw in the video, medicare was created about 50 years ago in 1965 to provide health insurance coverage to people 55 years old and older. it was expanded in 1972 to cover younger adults with permanent disabilities. it covers about 55 million people, about 45 million people age 65 and older and 9 million people under age 65 with disabilities. medicare covers people without regard to their income and without regard to their health status or medical needs. and it provides the same set of benefits to everyone who is entitled to medicare. these benefits include hospital
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and physician visits, preventative services and prescription drug benefits, which have been in increasingly large role player in recent years. medicare covers a population that on the whole tends to be thicker and have greater health needs than others. four in 10 people have chronic conditions. one in four have cognitive or mental impairments. those 85 and older are 13% of all people on medicare, while the youngest are under age 65 with disabilities, 17%. many people with medicare live on modest income that is derived from social security primarily. half have incomes less than about $22,500, which is about 200% of the federal poverty level. for the majority of beneficiaries, medicare benefits are provided through the traditional medicare program.
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benefits the hospital and physician services are divided into two parts, part a and part part be. part a is the hospital insurance program. this pays for hospital visits, skilled nursing facilities, health care and home health visits. the deductible is about $1200 this year and charges of an extended stay are included. many are entitled to part a, and enrollment is automatic when they turn 65 years old and they are on social security. part part b as a supplementary program that helps pay for physician visits, outpatient services, mammograms and flu shots. most people pay a monthly premium, what it is about $105 in 2013, but this is income
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related, meaning people with higher income pay a higher monthly premium. part b services are subject to coinsurance of about 20%. also subject to a deductible. enrollment in part b is voluntary, but most people who have part a also enroll in part b. the other two parts are different because they are delivered through private plans. part c is medicare advantage. this is known as an alternative to medicare. beneficiaries can enroll in a health maintenance organization or a preferred provider organizations receive their medicare covered benefit. most often it includes the part d drug benefit and often benefits that medicare does not cover, such as dental and vision services. the affordable care act made some important changes as to how
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the plans are paid. johnson tells little bit more about this. suffice it to say that in recent years the payment system has driven a dramatic expansion of medicare advantage plan availability and woman since 2006, which my colleague, tricia gretchen jacobson has been monitoring carefully. you can find this information on our website about medicare advantage availability and enrollment. today, 13 million people, about a quarter of medicare beneficiaries are enrolled in medicare advantage plans. part d is the drug benefit. it started in 2006 and is a voluntary benefit through stand-alone plan to supplement a traditional plan. those who in wool and it has more plans to choose from in each and each day, along with many medicare advantage plans.
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a standard benefit is given, as shown here. the plants can vary. the design of the benefit can vary, as long as it is equal in value. most plans actually do offer an alternative to the standard benefit. the beneficiaries pay monthly premiums, and if you have heard anything about part d, you may have heard about the coverage gap, which is called the doughnut hole. they had to pay 100% until they reached catastrophic coverage. as a result of the health reform law, that will be closed by 2020. people of low income and assets are eligible for additional subsidies for part d and about 10 million beneficiaries are currently receiving this extra help. about 90% of people on medicare have prescription drug coverage, mostly through a part d plan. the cost has risen, along with rising health care costs. blaster, medicare benefit
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payments totaled $556 billion, according to the congressional budget office. inpatient hospital services provide the most that 26%. hospitalizations are among the most costly services and this is followed by payments to medicare advantage plans, reflecting the large enrollees in this plan. spending on part d is 11%. the money to pay for all of these benefits come from several different sources there is a dedicated tax usually paid by employers. premiums are paid by beneficiaries. despite what it covers, there
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are gaps. it doesn't cover vision or dental services and it does not pay for most long-term services and support, such as extended stays in a nursing home. medicare charges include deductible for part a, part b, and part d, which increased each year. it could be a burden for those who are living on fixed income. along with the income related premiums for part b and part d. those with incomes as a couple greater than $170,000 a year. unlike typical private insurance plans, medicare does not place a limit on how much money should have to be spent out of pocket for medical expenses. most beneficiaries have employer-sponsored retiree plans, medicare advantage, private insurance policies known as medigap policies, which helped pay for medicare cost sharing requirements.
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and about 9 million low income medicare benefits with medicaid coverage would help pay their medicare premiums and provide benefits that medicare does not come such as long-term services and support for dental care. on top of all of these cost sharing requirements, rising costs are a real concern for beneficiaries whose out-of-pocket costs have been rising faster than their income in recent years medicare households spend about three times more than non-medicare households on their non-medicare expenses. all of these facts together focus greater attention on the adequacy of medicare and on ways to bolster and improve the medicare program. but in the current fiscal climate, it has lately been less about enhancing coverage and financial protections and more about ways to achieve savings. there have been several legislative efforts in the past few years that have taken steps in this direction. the affordable care act of 2010
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that includes and benefit improvements, including the coverage gap and eliminating cost sharing for prevention services. it also helps to achieve major savings, including changing a payment system for the medicare advantage plan, changing payments for hospitals and other types of providers. $716 billion as the lower spending in the next decade. budget control act of 2011 operate 2011 sequestration. it is was temporally put on hold, which also put off a cut. sheila can tell us maybe what will happen next. and the last thing i want to leave you with us this volume he here that medicare faces some financial challenges, it is important to remember that medicare is a vital source of financial and health protection for 50 million americans.
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it was a very popular program, moving forward it will be critical to understand the implications of proposed changes to the program for current and future beneficiaries. >> great, thank you so much. next, we welcome back the director of the medicare center, within the center of medicare and medicaid services. that person is jonathan blum. he has advised us on various topics and he has been a senior official. we are very glad to have you back. >> great, thank you both for the opportunity to talk to you today. i have four goals for this presentation. one is to give a quick overview is to have the medicare program pays part d plans for benefits
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provided to medicare beneficiaries. second, it is to give thoughts from a cms perspective of what are the current challenges, but i think more importantly, if you talk about the opportunities that were given to cms or the affordable care act, it fundamentally transforms how we pay for care, and leslie to talk about some of the progress. i think in a nutshell, we are seeing some very promising times. payments are changing. the medicare program is setting an example for how we want to pay for health care benefits for all coverage throughout the country. beneficiaries have two general pathways as to how they choose to receive medicare benefits. julia talked about the traditional fee-for-service program. part a, and choosing to enroll
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in part b, and a private drug plan, the outpatient drug benefit. the second pathways that medicare beneficiaries can choose to receive all aspects of the benefits through a comprehensive health plan. it is called the medicare advantage program. we have about one third beneficiaries in part c, the private side of medicare, and about two thirds in the traditional fee-for-service program. but the part c program, as juliet described him as going fast. we pay providers, physicians, and just to break down how medicare currently pays providers operating with the traditional fee-for-service program, includes hospital benefits, are drg payment system, skilled nursing facilities, we pay for other
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post acute care providers, known as long-term care providers, patient rehab facilities, the party program the part d side, the largest spending component opposition services, it is bound by the sgr cap on total physician services and outpatient hospital benefits through the system call the atc payment categories. home health benefits, clever tory services, dialysis services, and durable medical equipment from a traditional fee schedule model. for beneficiaries to choose the part d benefit, they have to choose a private part d plan. the medicare program pays a fixed program for these to cover
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all of the drugs covered by the plans and is adjusted by the beneficiary income status for the overall health status. the part c side, the private health side is a six monthly payment plan that gets adjusted with the overall health status to the beneficiary. beneficiaries who have been sicker get more than those who are healthier, they get a smaller payment to ensure that the plans here for both a healthy, but also for those with chronic conditions. shifting to the challenges in the medicare program, there are really three fundamental challenges that i like to talk about. the first is that medicare programs are spending more over time. we talk about some of the current spending trends, which is one fundamental challenge to the program. the program is spending more of gdp over time.
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the second challenge that faces the medicare program is that we see tremendous variation with spending that happened for a traditional fee-for-service program they can vary dramatically just across the country. there are different things that can occur for different health care services. one fundamental challenge of the program faces is to explain what drives these differences, whether or not there are different quality outcomes. this light compares the total hospital episode for a beneficiary with heart failure
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complications. [inaudible] it is not the inpatient costs, this is for teaching status and what happens to the patient after he or she leaves the hospital the causes of variation. post acute care is very dramatic across the country.
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this illustrates in our data that we do not have much correlation between quality and cost and cost outcomes. we can literally take a two by two matrix and cost metrics. we can plot different parts of the country. [inaudible] low cost, high cost, you don't see much correlation on our data between quality measures and cost measures. it really goes to a notion that we have to think about different ways to pay for care and have all parts of our country provide high-quality care at the lowest
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cost. hospital services, physician services, health plan of payments, we are implementing and have implemented different policy intervention to fundamentally change how we pay for care within the service program.
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we now have 250 aco is operating in parts of the country, groups of physicians working with hospitals to come into the program doesn't cause anyone to change their doctor or hospital, it's a notion of becoming accountable for the total cost of care and individual provider will receive a portion of the payment, a differential based upon the overall quality of care provided for beneficiaries. for longtime county agency has collected processed care measures, outcome measures, we
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are now paying the bonus payments based upon the overall quality rating. those plans are rated four-star, five-star, or otherwise, they said they will provide higher quality care and the plans now have greater opportunities for higher reimbursement, and it would drive better beneficiaries choices to choose the highest quality plan. we are seeing tremendous shift in beneficiaries.
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this includes a combined payment for a hospital costs, acute care costs, different ways to pay providers, getting back to that specific flight initiative, trying to figure out what it paid to have more consistent total cost of care and payments for a given episode of care. the medicare program is transformed. and i think compared to other private payers, there are no other programs or health insurance systems that i know of that have been so shifted towards quality based payments and total cost of care payments